Tech

Spotify hits 205 million premium subscribers, but financial losses swell

In brief: Spotify’s premium subscriber base continues to swell but so do the financial losses. In its just-released fourth quarter 2022 report, Spotify said it now has 205 million premium (paying) subscribers. That’s up from 180 million premium subs in the year-ago quarter – a 14 percent increase – and 195 million in the third quarter.

Monthly active users (which combine both premium and ad supported users) reached 489 million, a quarter over quarter increase of seven percent compared to last quarter’s 456 million monthly active users. Spotify noted continued strength in multi-user premium plans.

Despite the gains, the financial losses continue to pile up. Spotify generated 3.17 billion euros ($3.44 billion) in revenue in the fourth quarter but posted a net loss of 270 million euros ($293 million). For comparison, the company’s net loss was just 34 million euros ($37 million) in the fourth quarter of 2021.

Spotify cited increased personnel costs due to headcount growth and higher advertising costs for the losses. The impact of recent acquisitions such as Heardle, Chartable and Podsights also factored into the equation.

Earlier this month, Spotify CEO Daniel Ek confirmed the company would be reducing its headcount by about six percent or roughly 600 employees. Like other tech leaders, Spotify expanded its workforce too quickly during the pandemic. Ek took full responsibility for the misstep, noting that he was too ambitious in investing ahead of revenue growth.

Spotify’s impressive user gains seemingly outweighed the mounting losses, at least in the eyes of investors. Shares in Spotify are up over 10 percent on the news, currently trading at $110.15 as of this writing. That is far from Spotify’s all-time high of nearly $365 per share in February 2021 but is a step back in the right direction.

Looking to Q1 2023, Spotify is expecting to reach 207 million premium subscribers, 500 million total monthly active users and revenue of 3.1 billion euros with an operating loss of 194 million euros.

Image credit: Suvan Chowdhury, Victoria Akvarel

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